Commentary on Political Economy

Wednesday, 23 December 2020



Vaccine fiasco may be the biggest failure in EU history

If EU elites don't yet realise that this is going to mushroom into one of the biggest failures in the history of the European Project, they will find out soon enough.

Ambrose Evans-Pritchard

The EU's politicisation of COVID-19 vaccines is turning into an economic and political black swan event.

There will be a price to pay as the consequences of this profound failure unfold in 2021, and an even higher price as people start to understand why it happened.

Europe's double-dip recession will be stretched out for another quarter. Recovery will be delayed until the second half of the year.

Whatever happens, it is going to be a difficult time for Europe. David Rowe

Thousands more companies will be pushed over the brink, threatening a cascade of defaults and raising the risk of a banking crisis.

Labour scarring will run deeper. Public debt ratios across the Club Med bloc will move closer to the point of no return.

It is by now widely known that the European Medicines Agency wasted two critical weeks after the UK, Canada and even America's notoriously cautious FDA had approved the Pfizer BioNTech vaccine.

The agency would have wasted another week had there not been complaints from Berlin.

The Commission's insistence that all EU states should then launch the vaccine at the same time after Christmas has lost yet more critical days.

Germany bets on EU and loses

Germans have been subjected to the surreal spectacle of trial drills by their well-organised vaccination machine when they could have been doing the real thing.

They cannot yet receive a jab made by their own start-up group BioNTech. "Germany has bet on Europe, and lost heavily," was the headline across Die Zeit.

But these delays pale compared to what is coming next year. The European vaccine alliance has failed in its one overriding purpose: it neglected the job of acquiring vaccines.

Germany has just 400,000 doses of the BioNTech jab and may not receive more than 11 million to 13 million by the end of March. Berlin is taking matters into its own hands but the damage is done.

A devastating report by investigative journalists at Der Spiegel entitled The Planning Disaster pulls away the curtain on the ineptitude of the Commission, which drifted through the summer with little action.

Brussels picked a mix of vaccines that mostly will not be ready until the second half of 2021 at the earliest. It failed to lock in a firm order for the BioNTech jab until mid-November, long after it was clear that this RNA vaccine was a front-runner.

Even then it declined the full offer of 500 million doses for the EU27. The Commission ordered just 200 million, with an option for 100 million more. It also turned down most of the offer from Moderna.

Der Spiegel said there had to be parity with Sanofi's "French vaccine", which has since gone awry and will not come on stream before the end of 2021. "Buying more from a German company wasn't in the cards", said one source.

You can interpret this as a case of European political correctness running amok, but there is an even worse construction: the Commission seems to have intervened in the interests of one commercial company, spending public funds corruptly in violation of its own competition law.

"The combination of a delay of vaccine approval and a procurement policy under suspicion of prioritising producer interest would be a shock from which the EU would struggle to recover. From now onwards, COVID deaths may be EU deaths," said Eurointelligence.

A German stress test

We may be heading into a year where German popular support for the European Project will be stress-tested like never before. Two grave matters will intersect.

It will become clear that the fundamental health security of the country has been endangered by EU politics.

At the same time, monetary union will go through another spasm of tension. Europe's leaders have oversold the €750bn (£675bn) Recovery Fund as a springboard for Keynesian reflation.

It is spread too thinly over five years to move the macroeconomic needle. There is already talk sotto voce that the Recovery Fund will need to be much larger to avert lasting economic damage.

If so, it means telling German taxpayers that they will have to dig deeper into their pockets to fund even greater transfers to the south.

The European Central Bank can shut down the price signals in the sovereign debt markets for a while longer by soaking up the bond issuance of Italy, Spain, Portugal, and indeed France, but the longer it does so, the clearer it is that the ECB is conducting illegal fiscal rescues.

While pandemic QE lasts until March 2022, the problems will surface before then.

German public opinion will react once there are first flickers of inflation, which will occur around Easter for "base-effect" reasons and because of commodity supply constraints. You can dress up QE as a tool for fighting deflation. How do you explain it if prices are rising briskly?

The great irony

For now attention is on Britain's particular travails but this is unlikely to last. Scientists working in the UK discovered and tracked the B.1.1.7 mutation because this country has done almost as much genome sequencing of COVID-19 as the rest of the world combined.

COVID-19 Genomics UK Consortium (COG-UK) makes these sequences available to international science, a big contribution to the global fight against the pandemic that is little appreciated in lay circles. You certainly would not know this from some of the abuse being hurled at the UK.

The great irony is that only the Oxford-AstraZeneca vaccine will be available soon enough at scale to prevent a disaster for Europe over the next six months.

"Whether Germany fares well or not hinges on the AstraZeneca vaccine," says Karl Lauterbach, the health chief for Germany's Social Democrats.

The vaccine will be approved in the UK after Christmas. The European Medicines Agency will have to decide whether to accept an accursed product of this apostate island.

My guess is that it will drag feet for faux procedural reasons until public opinion forces the issue.

Whatever happens, it is going to be a difficult time for Europe. People will notice as the UK conducts several million vaccinations a week all through January, and there will be similar images from America and Canada.

They will ask why the doses are being dribbled out so desperately slowly across the Continent.

If EU elites don't yet realise that this is going to mushroom into one of the biggest failures in the history of the European Project, they will find out soon enough.

The Telegraph London

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